Homework Solutions: Spilker et al. C h. 20
40. Harry and Sally formed the Evergreen partnership by contributing the following assets in exchange for a 50 percent capital and profits interest in the partnership:
Harry:
Cash
Land
Totals

Basis Fair Market Value
$ 30,000
$ 30,000
100,000
120,000
$ 130,000
$ 150,000

Sally:
Equipment used in a business
Totals

200,000
$ 200,000

150,000
$ 150,000

a. How much gain or loss will Harry recognize on the contribution?
b. How much gain or loss will Sally recognize on the contribution?
c. How could the transaction be structured a different way to get a better result for
Sally?
d. What is Harry’s tax basis in his partnership interest?
e. What is Sally’s tax basis in her …show more content…
Kevan’s basis is $0, Jerry’s basis is $385,000, and Dave’s basis is $245,000.
See the table in part f. above.

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61. Hoki Poki, a cash-method general partnership, recorded the following items for its current tax year:
Rental real estate income
Sales r evenue
§1245 recapture income
Interest income
Cost of goods sold
Depreciation - MACRS
Supplies expense
Employee wages
Investment interest expense
Partner’s medical insurance premiums paid by Hoki Poki

$2,000
$70,000
$8,000
$2,000
($38,000)
($9,000)
($1,000)
($14,000)
($1,000)
($3,000)

As part of preparing Hoki Poki’s current year return, identify the items that should be included in computing its ordinary business income (loss) and t hose that should be separately stated. {Hint: See Schedule K-1 and related preparer’s instructions at www.irs.gov.}
Hoki Poki’s ordinary business income is computed as follows:
Description

Total Amount

(1)Sales revenue
(2) Section 1245 recapture income (3)Cost of goods sold
(4)Depreciation - MACRS
(5)Supplies expense
(6)Employee wages
(7)Partner’s medical insurance premiums
(8)Ordinary business income $70,000
8,000
(38,000)
(9,000)
(1,000)
(14,000)
(3,000)
$13,000

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Hoki Poki’s separately stated items are reflected in the table below:
Separately Stated Items
(1)$2,000 Rental real estate income